Tesla Model 3
Tesla Model 3

Tesla is more a tech giant than a car manufacturer

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Tesla (TSLA) joined the S&P 500 directly at the sixth position right after Apple, Microsoft, Amazon, Alphabet, and Facebook. They are all tech giants.
Tesla

A car manufacturer that is also a technology company with its core technologies as the battery, the computer software, and the proprietary motor

Martin Eberhard

Tesla history on NASDAQ

Tesla was founded in July 2003 by Martin Eberhard and Marc Tarpenning. Eberhard said he wanted to build “a car manufacturer that is also a technology company” with its core technologies as “the battery, the computer software, and the proprietary motor“.

In February 2004, Elon Musk invested $6.5M out of  $7.5M Series A investment and became chairman of the board of directors. He became CEO of Tesla in October 2008.

On June 29, 2010, Tesla Motors launched its IPO on NASDAQ. It was the first American car manufacturer to do so since Ford in 1956. The Tesla stock was expected in a range between $14 and $16 but the stock was finally introduced at $17 and closed its first day at $23. The IPO raised US$226M for the company.

As I write those lines (December 22), the Tesla share is worth $621. This means that Tesla’s stock increased by +3,553% from its IPO. It means that someone who has invested $27,375 10 years ago at the IPO is now having $1M. If you only consider the beginning of 2020, the stock has raised by an impressive +642%.

Tesla compared with other car manufacturers

Tesla Market Cap is $595B for Dec. 22, 2020. Let’s compare this to other car manufacturers.  Elementary maths shows that Tesla is worth Toyota + Volkswagen + Daimler + General Motors + BMW + Ferrari + Honda, which represents all non-Chinese car brands in the market cap top 10. 

Then, if you look at how many some of those car manufacturers have produced in 2019 compared to Tesla, the numbers do not match at all. 92.8 million motor vehicles were produced globally in 2019. Volkswagen made in 2019, around 11 million vehicles, immediately followed by Toyota with 10,7 million.  Between January and December 2019, Tesla only produced some 365,300 vehicles. 

You could argue that a Tesla car is more expensive than one from Volkswagen or Toyota. So, let’s now compare the 2019 revenue from those 3 companies: 

  • Tesla: $24.6B
  • Volkswagen:  252.6B
  • Toyota: $288.77B (¥29.929 trillion from March 2019 to March 2020)
So, both Volkswagen and Toyota were making 10 times more sales than Tesla in USD.
Tesla Model 3 interior

Is Tesla a car manufacturer or a tech company?

Some people are saying that a Tesla is a tablet on wheels. So, maybe the comparison should be with other tech giants such as Apple. 

Since Tesla joined the S&P 500, it has been propelled directly to the 6th rank. But, guess what, all the 5 first places are held by a giant tech (all figures on December, 22th):

  1.  Apple: $2,180 B
  2. Microsoft: $1,682 B 
  3. Amazon: $1,608 B
  4. Alphabet: $1 174 B
  5. Facebook: $777 B
The first observation I make is that the weight of the tech giants in the S&P 500 is tremendous. Secondly, even if you apply valuation multiples of tech companies, the price of Tesla seems to be impossible to justify at the moment. Some people are talking about a tech bubble on some stocks, including Tesla.  I am one of them, but maybe I am wrong. 

Sources

Tesla Inc, Wikipedia

TSLA historical data, NASDAQ

Photo credits

Tesla Model 3 – Photo by Vlad Tchompalov on Unsplash

 Tesla Model 3 Interior – Photo by David von Diemar on Unsplash

 

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